THE DIFFERENCES IN TAX TREATMENT OF SMALL AND MEDIUM ENTERPRISES IN EUROPEAN UNION MEMBER STATES AND CROATIA

Abstract

The importance of SMEs in the overall economic development as well as the tendency of Croatian accession to the European Union provide motivation for research of differences in tax treatment of SMEs in Croatia and EU countries. When Croatia joins the EU, a significant part of the tax system must be reformed according to the joint directives that regulate the process of tax harmonization in the European Union. One of the effects of these reforms should be in increased competitiveness of Croatian SMEs in the common market. Therefore, it is important to identify in which areas of the tax system changes can improve competitive position of Croatian SMEs. The paper analyses different features of corporate income tax together with all sorts of incentives and relief from other taxes that present burden for the SMEs in European Union Member States and Croatia. Special attention is devoted to preferential tax treatments that can boost competitiveness in the country. The main thesis of the paper argues that conclusions based on comparative research of the position of SMEs in the tax system can enable creation of optimal national tax system both with the accordance with the EU regulation and goals of increased competitiveness.